South Africa\u2019s government is considering taking over part or all of Eskom’s R392 billion ($25.8 billion) debt as it seeks to restructure the cash-strapped power utility\u2019s loan obligations, according to the International Monetary Fund.<\/p>\n
Eskom\u2019s financial position is of particular concern and requires a decision on how to address its \u201cunsustainable\u201d debt levels, the Washington-based lender said in a statement published on its\u00a0website following online meetings between its staff and South African officials.<\/p>\n
The local authorities are discussing whether the state should assume part or all of the debt upfront or continue making annual transfers of funds to the company, which could be higher than budget estimates, it said.<\/p>\n
While shifting Eskom\u2019s debt onto the state\u2019s balance sheet would make the utility financially viable and smooth its planned split into transmission, generation and distribution businesses, it would precipitate a marked deterioration in the nation\u2019s already stretched finances.<\/p>\n
Gross government debt amounted to R4.27 trillion at the end of last year, compared with the National Treasury\u2019s November estimate of R4.31 trillion, or 69.9% of gross domestic product, for the current fiscal year.<\/p>\n
Surging debt and debt-service costs, the fastest-growing expenditure line item in the budget since 2011, are already key risks to fiscal sustainability and have been compounded by the fallout from the coronavirus pandemic, years of overspending, mismanagement and graft.<\/p>\n
Transfers to Eskom averaged about 1% of GDP in the past two fiscal years, while its government-guaranteed loan facility stands at about 6% of GDP, according to the IMF.<\/p>\n
The National Treasury didn\u2019t make additional provisions for Eskom in November\u2019s medium-term budget policy statement and Finance Minister Enoch Godongwana suggested that the utility sell some of its\u00a0coal-fired power stations\u00a0to reduce its debt burden.<\/p>\n
The Treasury didn\u2019t immediately respond to an email from Bloomberg News seeking comment. The government has previously said it may take over some of the utility\u2019s debt, but never suggested that it is considering assuming it in its entirety.<\/p>\n